Burnham’s energy pitch expected as diesel worries fan inflation fears while Anthropic warns on AI
Susannah Streeter, Chief Investment Strategist, Wealth Club: “There is jitteriness on financial markets as crude prices flicker upwards again, and concerns spread about a contraction in essential fuel supplies, which could light fresh fires under inflation. The FTSE 100 has managed to deflect some of the worry and has opened higher, but wariness is set to remain.
Given the concerns over the damage to businesses ahead if the energy crunch worsens, strengthening security while limiting the cost of Britain’s energy supply is set to be one of the key themes of Andy Burnham’s speech to the Labour Party conference today. The pound is hovering around two-month lows as the Prime Minister prepares to take to the stage, as investors assess the fragile nature of the UK economy. The government’s borrowing costs remain painfully high, as concerns about higher inflation ahead have intensified. Ten-year gilt yields are trading around 5.4%, the highest level in nearly two decades, with investors pricing in at least four interest rate hikes over the next year. Although the latest snapshot of retail prices from the BRC Shop Price Index shows a very slight weakening in September amid intense competition and discounting, companies are unlikely to be able to keep absorbing higher overheads.
Recent comments from Bank of England policymakers have indicated they are increasingly concerned about so-called second-round effects of high energy prices taking place – when costs are passed on via higher prices of goods and services, potentially leading to a wage hike cycle, as employees demand higher salaries to keep up with rising prices. Already, the government is wading through quicksand, with budgets being sucked away by the ever-higher costs of servicing growing debts. It’s putting the comparatively generous terms of state pension hikes into the spotlight, with speculation about changes to the triple lock set to intensify ahead of the Budget.
While companies and consumers are bracing for higher energy bills to land this winter, prices are escalating to painful levels at the pumps. The diesel stress cycle, already in an acute phase, risks intensifying sharply if the US follows through with a ban on diesel exports. The UK in particular is highly reliant on imports, especially from the US, given our ultra-low refining capacity. It’s looking increasingly like a trigger President Trump will pull given he is running out of time to offer relief to hard-hit households. He may have once again dangled the prospect of $5,000 checks for families, but that would need Congressional approval. In the meantime, US farmers, a group usually offering Republicans a bedrock of support, are turning increasingly vocal ahead of the midterms about onerous costs. While a diesel export ban might provide some short-term relief given that it would lead to a surplus domestically, longer-term US refiners may dial down production, and imports of diesel to other parts of the US reliant on overseas supplies could be hit by retaliatory action. But in Trump’s world, short-term gains aimed at reviving his flagging popularity seem to be his modus operandi, and even a partial ban could prove highly damaging.
While risk warnings are two a penny in a prospectus, Anthropic appears to have gone in heavy in its publication, highlighting the existential threat to humanity posed by the technology. While these calls from Anthropic researchers and executives have already hit the headlines over recent weeks, the depth of the warnings to potential shareholders is unusual. It’s set to reignite the debate about the rapid transformative power of the technology and just how long its unbridled power can continue without heavy regulation, which could put the brakes on frontier development and the pace of adoption by economies. It appears there’s a massive contradiction at the heart of the prospectus, with the company effectively asking investors to finance the very acceleration it warns could create risks that may be difficult to control. Anthropic is also still making massive losses and forecasts extraordinary levels of spending needed in the future, to the tune of $518 billion to stay at the crest of the wave. That could also shake the confidence of some investors who remain less than convinced that the economics of frontier AI will ultimately justify the scale of the investment required. But at the same time, Anthropic is making a massive pitch about how transformative the technology will be for society and the global economy, so there’s set to be a big wave of FOMO unleashed in the run-up to its listing, which isn’t likely until after the November US midterms. The ‘fear of missing out’ on getting a slice of one of the current front-runners in the AI race could prove a powerful force for investors.
Shein has taken another stumble on the global retail catwalk, with its share price falling to a record low. The company reported a 53% decline in first-half operating profit, as rising costs and weaker demand weighed on its first results since it listed in Hong Kong. The formula that propelled the extraordinary rise of the fast-fashion giant is coming under increasing strain. While its low-cost model used to shine in a world hooked on disposable style and cheap distribution costs, it’s been battered by changing fashion tastes and the ramping up of freight and import costs. It reported net revenue growth of just 1% for the first half of 2026, while the slowdown in profitability accelerated during the second quarter. Shein is losing its shine as pressure intensifies on many parts of the business.
The US has ended the de minimis exemption that allowed low-value parcels to enter without customs duties, and the EU has already introduced a temporary €3 customs duty on low-value parcels. Given that its models have been built around shipping vast numbers of inexpensive individual packages directly to consumers, adding costs at the border weakens the economics underpinning the whole proposition. Ultra-fast fashion no longer has the same pulling power with consumers. The resale market has expanded dramatically over the past decade, giving shoppers access to better-known and often more expensive brands at much lower prices, while concerns about the environmental and social impact of disposable clothing have also become harder for the industry to ignore.”